The Indian Economy: From Growth to Stagflation to Liberal Reform

This paper considers the optimistic scenario that India was on a high growth path and would follow China’s path with a lag (as its reforms started in 1991 compared with China’s in 1980) which would produce an economic miracle. This did not happen and since 2011 India’s growth seemed to be reverting to what has been termed “the Hindu Rate of growth”. This paper considers why this happened and the likely future path of the Indian economy following the victory of Narendra Modi’s Bhartiya Janta Party (BJP). The paper evaluates the change in India’s economic fortunes following the 1991 economic reforms in historical perspective. The sources of the growth acceleration are explained with an examination of why growth faltered. India’s highly disputed revision of the GDP series shows annual growth rising to 7.5% in 2015-16, but it is more likely that it is around 6%. The author concludes that given its economic fundamentals, with improved policies India would be able to grow at about 10% leading to a per capita income growth of about 8.5–9% for the next two decades.